New Delhi. Standard deduction was started with the budget of 2018. Earlier its limit was Rs 40,000 which was increased to Rs 50,000 next year. The purpose of starting this is to give more money to the employees by giving them tax exemption.
Employees and employee organizations believed that the rules of income tax are not in favor of the salaried. Businessmen and consultants claim exemption by showing a variety of expenses whereas salaried people have very limited options.
In order to address this complaint, the government in 2018budgetI had implemented it. Standard deduction was introduced by removing tax benefits on medical and transport allowances. Let us know what is the standard deduction and its effect on the salaried people.
what is standard deduction
Standard deduction is the amount that is deducted directly from your income. Tax is calculated according to the tax slab only on the remaining income. This reduces your total tax payable amount and sometimes people who are out of the tax slab. Let us try to understand it with an example.
The standard deduction limit is Rs 50,000. However, if your salary is less than this per annum, then your entire salary will come under standard deduction. For example, if a person takes a salary of 5 lakhs in a year, then his tax will be deducted according to 4.50 lakhs. On the other hand, if a person takes Rs 48,000 as salary in a year, then it will come under standard deduction of full salary.
Who can take advantage of this
The standard deduction can be availed by the salaried employees and pensioners who have not opted for the new tax rules. There is a provision for a lower tax rate in the new rules. Apart from this, pensioners taking pension are also entitled to get this deduction. But standard deduction is not available on family pension. This means that after the death of an employee, if any of his dependents is drawing family pension, then he is not entitled to this deduction or exemption.
